Lyft said it would shut down operations in California if forced to classify drivers as employees, company executives said in a profit-making call to investors Wednesday. Lyft joins Uber in threatening to pull out of one of the most important US markets in terms of driver employment status.
That’s the classification of drivers hailed as independent contractors, which Uber and Lyft say most drivers prefer because of their flexibility and ability to schedule their own hours. But labor unions and elected officials claim this deprives them of traditional benefits such as health insurance and workers̵7; compensation. Earlier this week, Uber and Lyft were ordered by a California Superior Court judge to classify their drivers as employees. Both companies have said they will appeal the ruling, which stood for 10 days.
But if their grievances fail, Lyft could join Uber in closing stores in California, said company president John Zimmer. “If our efforts here are not successful, they will force us to discontinue operations in California,” Zimmer said in a phone call announcing revenue for the second quarter of 2020. “Fortunately, voters in California can do their voice heard voting yes with Prop 22 in November. “
Uber and Lyft, along with DoorDash, are funding a voting measure, Proposal 22, that will transcend AB5 by classifying street hail drivers and other concert economy workers as independent contractors. The measure of voting is Plan B of enterprises if their efforts to overthrow the legal challenges of the state fail.
If drivers were classified as employees, Uber and Lyft would be responsible for paying their minimum wage, overtime compensation, paid rest periods and reimbursements for the cost of driving for companies, including the distance of personal vehicles. But as independent contractors, drivers do not receive any of these benefits.
Lyft’s earnings report was bleak as the closure of COVID-19 continued to push application-based greeting demand. The company reported $ 339 million in second-quarter revenue, down 61 percent from the same period last year. Lyft Active Fraud also fell 60 percent to 8.7 million active users this quarter compared to 21.8 million last year.
Lyft lost less money this quarter compared to last year because it was making fewer trips. Net losses for Lyft totaled $ 437.1 million in the second quarter, compared with $ 644.2 million in the same period last year.
The company earns money for greeting trips, bike and scooter-trips and its new car rental business. Unlike Uber, Lyft does not have a full catering and food delivery business to fall behind as its main greeting business falls.